HMRC has published the outcome of its call for evidence in relation to tackling fraud on goods sold online, ‘Alternative method of VAT collection’. This explored the prospect of real time VAT collection.

HMRC estimates that £1 - £1.5 billion of VAT was lost to VAT fraud due to online shopping in 2015/16.

To help tackle this, and following the consultation responses, HMRC plans to move forwards with a ‘split payment’ approach.

  • Since September 2016, HMRC can make Online market places joint and severally joint and severally liable for VAT of overseas businesses.
  • Split payment, effectively means that the VAT is collected and deposited with the tax authority in real time.
  • This would rely heavily on the payment technology:
    • Respondents main concern was that the right VAT amount would not be able to be extracted accurately using the current data available in the payment cycle.
    • Changes would be needed to how the payment cycle to include detailed transactional information.
    • HMRC will continue to work with UK consumers and will also extend research to UK and non-UK based sellers to help develop the model.

HMRC expects to consult on potential options for a split payment model in 2018.

In the meantime, the EU is also moving forward with sweeping changes to cross-border VAT and recently released Draft legislation which will start to take effect from 2019. This will effect the Place of supply, and will introduce new Mini One Stop Shops.


Online Marketplaces: joint and several liability

Place of supply: goods

EC action plan: a single EU VAT area

External link: You can find HMRC’s call for evidence and summary of responses here.



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